Thursday’s price driver was the release of government inventory figures that came in only slightly bearish but were sufficient to send February futures nearly a dime lower.

The Energy Information Administration reported that inventories fell by 81 Bcf, a somewhat thinner draw than what analysts were expecting. At the close February had dropped 9.4 cents to $3.027 and March had lost 9.3 cents to $3.055. February crude oil added 29 cents to $99.65/bbl.

The natural gas market continued to stare down a dark hole waiting for the storage surpluses to stop building and thereby relieve what has been a constant driver of lower prices. This was not the week that withdrawals came into some sort of alignment with historical trends. Last year at this time 143 Bcf was withdrawn, and the five-year trend was for a pull of 122 Bcf. The year-on-year surplus has ballooned to 297 Bcf and the year-on-five-year surplus is up to a whopping 428 Bcf.

The consensus was for about an 85 Bcf withdrawal. At the low end of estimates was Citi Futures Perspective’s Tim Evans with a 74 Bcf estimate. Ritterbusch and Associates was at the high end with a 90 Bcf withdrawal expected. Bentek Energy forecast a decline of 79 Bcf. Energy Metro Desk (EMD) revealed an 84 Bcf average from a sample of 31 with a range of 74-93 Bcf.

Just how overburdened will the market be by the traditional March 31 end of the season? EMD in its report said UBS forecasts “inventories bottom on March 31 at 2.0 Tcf (0.45 Tcf above normal and 0.3 Tcf above the 2006 record high).”

Technical analysts are looking ahead to next week’s activity, with Friday’s expected light trading notwithstanding. “It looks like near-term pivotal support at $2.96-3.01 will be tested [Tuesday] morning because it is so close,” said Walter Zimmermann, vice president at United-ICAP. “It would be nice from a technical standpoint if support held and the market made some kind of technical rebound, but it’s too early to hold a requiem for natural gas since support hasn’t been broken.

“If it does, then we have to go back to the long-term uptrend line in place since January 1992, and that cuts at $2.605. The important thing is that the uptrend line has never ever been broken in over 20 years with many, many tests. That will be a historic event if natural gas prices break $2.60.”

“If we continue to have a nonwinter, they keep pumping shale gas out, and the economy continues to flounder, that would be a pretty bearish combination of events. Unless we can get some kind of boost, whether from curtailing output or from some kind of sustained economic recovery [the bear market is likely to continue], but if you look at simple supply and demand, why should prices find support here?

“Technicals tend to bottom out before the news improves, and the first clue would be if we get some sort of sustained reversal from $2.97. There are technical warning signs that natural gas is moving into a space where a sustained reversal higher becomes possible. There is bullish momentum divergence on daily and weekly charts, and there is an extreme bearish sentiment situation, but these are more immediate warning signals than they are ‘buy’ signals.”

“It looks like we’ll get the answer to whether we’ll hold $2.97-3.01 on [Tuesday].”

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